Is new IP legislation arriving in Mexico?
Eduardo Kleinberg and Santiago Zubikarai of Basham evaluate the new industrial property legislation under consideration in Mexico, assessing changes to the law on damages, fines, the registration of trademarks and patents
A draft for a new Industrial Property Law is being discussed in the Senate, which, if approved, could imply considerable changes in the way that industrial property rights are obtained and enforced in Mexico. Given that such initiative has been submitted by the ruling party, which has control of both legislative chambers and the presidency, it seems highly likely that it will eventually become law. While a full study of the proposed law and its changes would demand several additional publications, this text will summarise the most important proposed changes.
Key entities and fines
From the text of the initiative, it is obvious that the position of the Mexican Institute of Industrial Property will be strengthened, particularly in pursuing and punishing infringement of industrial property rights. Such authority, which in Mexico is tasked with both granting industrial property rights and enforcing them will find itself with a wide array of new tools to protect industrial property rights in Mexico.
Notably, Article 5, Sections VI and VII of this draft statute provides that not only will the Mexican Institute of Industrial Property be able to impose fines for infringement, but also to force payment under the Federal Tax Code of Mexico. Up until now, they could impose fines for infringement to industrial property rights, but the payment of the fines is usually executed by a local treasury and the Mexican Institute of Industrial Property does not have the authority to force the payment of the fines it imposes. This has led to a certain distortion where an infringer may be punished with a fine but yet, the Mexican government may or may not show up to collect such a fine and if necessary compel payment. By bestowing the authority described in the prior paragraph, the Mexican Institute of Industrial Property is now allowed to collect the fines it imposes and if need be, resort to some of the much-feared tools (i.e. seizure and liquidation of assets) that would otherwise be normally reserved for the tax revenue service. In this way, infringers may be compelled to pay in a much more effective manner, thereby raising the risks in a trademark infringement action. Of course, the execution of fines can be halted if the fine is duly challenged and security for its payment is provided in a form authorised by the law (i.e. a bond), but the risk that the fine will be collected if the infringer loses will become much higher.
Similarly, the fines for infringement will be considerably raised, by roughly 10 times. Therefore, by substantially increasing the liability for infringing industrial property rights, while at the same time giving the Mexican Institute of Industrial Property much better tools to implement punishment and even deprive the infringer of assets in the event of default on payment, the situation for potential infringers has just become far worse (at least for infringers with assets in Mexico that can be readily seized and liquidated).
Historically, damages for the infringement of industrial property rights have been very hard to obtain given that currently you need to first resort to the Mexican Institute of Industrial Property to obtain a resolution imposing a fine for infringement and then resort to the courts to obtain damages (a two-step process that is very slow and expensive). However, the reform stipulates that the owner of industrial property rights can either ask the Mexican Institute of Industrial Property to award damages after finding infringement through what seems to be a very expedited process or go directly to the courts through their usual procedural rules and timeframes to obtain the award for damages. In other words, the owner of a trademark registration or patent will no longer have to wait for a decision from the Mexican Institute of Industrial Property before beginning a separate procedure for damages. Going directly to the courts will now be perfectly possible or, if the plaintiff so prefers, trying the expedited process before the Mexican Institute of Industrial Property is also an option.
Awarding damages has been one of the greatest challenges of the current Industrial Property Law in Mexico. The current process is so expensive, slow and inconvenient for rights holders that most of them will file an infringement action simply to halt the infringement and have a fine imposed on the infringer, but will not bother to pursue damages. Under the current system you have to first sue and win before the Mexican Institute of Industrial Property (including the appeal process), and then sue and win before civil courts (again including the appeal process) to obtain an award for damages. While some colleagues are understandably concerned about the technical capacity of the Mexican Institute of Industrial Property to calculate and award damages and others are worried about the technical capacity of judges to understand and solve infringement cases that have been historically delegated to other government bodies, this is hopefully a step in the right direction. There should be an increase in infringement cases by providing a financial incentive to rights holders and, conversely, an increase in risk for potential infringers.
In addition, in order to ensure the fulfilment of injunctions, the seizure of infringing goods and other determinations that the Mexican Institute of Industrial Property may make, the law now expressly allows such authority to formally request the assistance of any police forces. The text also implies that the new, heavily militarised force known as the "guardia nacional" and perhaps even regulars from the Mexican armed forces would be permitted to assist in enforcing the decisions of the Mexican Institute of Industrial Property. This is because Article 5, Section IX seems to imply that assistance may be sought from any civil or armed institution.
We have much higher fines and much stronger tools for the authority to compel payment (identical in many aspects to those for compelling the payment of owed taxes). Obtaining damages seems to have become far more feasible and, last but not least, the groundwork for greater cooperation between the Mexican Trademark Office, police bodies and even armed forces has been laid. All of these show a genuine interest on behalf of the Mexican government to tackle infringing practices and counterfeit goods and enable rights holders to enforce their rights with greater ease.
Registration of trademarks
In relation to the registration of trademarks, the draft law also provides some interesting changes. The law allows applicants to pursue registration in multiple classes. This is new in Mexico. Up to now, trademark applications could only include products and services for one class, but this draft law provides for both multi-class applications and for their division at almost any time during their prosecution. A reform of procedural rules for oppositions to make the whole trademark registration process more efficient is also foreseen. Partial cancellations and annulments of trademarks are also foreseen.
Recognising the problem of trademark "squatting", the draft law provides a prohibition on registrations that may seem oddly familiar to those of us involved in domain name disputes. The law provides that registration will not be issued to applicants who seek to register in bad faith and exemplifies that bad faith will exist if the applicant tries to sell or license an application for a trademark to the legitimate owner of the mark for a price exceeding the documented costs of prosecuting the mark. This has the potential to reduce bad practices to the benefit of foreign applicants who may seek to register in Mexico, but whose reputation precedes their fillings and thus risk unrelated parties registering their marks with the intention of requesting money for their sale.
In respect to patents, one very positive aspect is that the draft provides that Mexico will grant patent extensions. Currently, patents last 20 years from the filing date of the application and this timeframe cannot be extended. The draft, by contrast, provides that if the examination process exceeds five years, then at the time that the fees for granting the patent are paid, the applicant can file a simultaneous request to obtain an extension. Such an extension will only be granted if the applicant can show that the delay was unreasonable and due to the Mexican Institute of Industrial Property. If so and if the delay exceeded five years, then the applicant will be given one extra day for every two extra days the delay took.
The exceptions from patentability also apply to some controversial categories of inventions. In essence the law indicates that certain inventions which are contrary to scientific ethics cannot be patented and further exemplifies human cloning and its products, genetic modifications in humans, uses for human embryos, certain modifications to animal genetic identity and some genetic sequence discoveries as not qualifying for patent protection. The inclusion of these categories as exempt from patent protection could appear to be set more along ideological lines than having a real justification and although the exposition of motives for the project mentions that it seeks to increase scientific activity in Mexico, in these fields it just might have the opposite effect.
In respect to the pharmaceutical industry, the draft law provides an exception for protecting the manufacturers of generics. Essentially eight years before a biomedicine patent expires and three years before a chemical pharmaceutical medicine patent expires, manufacturers of generics will be allowed to perform any studies, trials and experimental production that may be necessary to obtain a sanitary registration without committing patent infringement. For this purpose, the Mexican Institute of Industrial Property will publish a list of the patents entering these periods. In this way, the idea is that a generic product can begin the process for entering the market without waiting for the patent to expire, so by the time the patent expires, the manufacturers of generic products will have already advanced their sanitary registration process.
One amendment that the law seems to have made relating to the prosecution of patents is that it now foresees a term for voluntarily dividing a patent application. Under the current law, there is no such term and courts have interpreted this as a right for the applicant to divide an application at any time, even where the original patent application has already been granted, refused or abandoned.
Another relevant change for patent applications is a proposition that only two office actions will be issued for the substantive examination of the patent. This could potentially help cut down patent examination times, but it also means that applicants will only have two chances at amending the application and supporting documents and persuading the examiner to issue the patent, which might result in more final refusals of patent applications.
Seeking to cut down on having several patents covering the same invention, the draft provides in Article 50 that the Mexican Institute of Industrial Property has a duty to "protect the public domain" and avoid doubling patents for the same invention. This will probably force potential applicants to take additional care in formulating applications for subject matter that has already been patented, even if they are the holders of the prior patent, since this provision seems to be specifically targeted at refusing patent protection in such cases. However, the degree by which the applicant can characterise the second application as comprising a second invention will surely come into play.
In sum, this draft new law has the potential to bring Mexico's protection of industrial property rights into the twenty-first century. Despite some debatable aspects of the law such as the categories for the exclusion of patent subject matter and allowing the Mexican government to potentially call on the police or even armed forces to enforce its decisions on intellectual property, we believe that the contents of the draft law are, overall, a step in the right direction. It will provide rights holders with better protection and thus much needed legal certainty for anyone wishing to do business in Mexico.
Eduardo Kleinberg has been a partner at Basham since 2003 and managing partner since 2014. He is the head of the trademark, franchising and licensing practices and has vast experience in domestic and international matters. A brief selection of his activities are as follows: advising clients in IP matters in general; negotiating and drafting licence, franchise, copyright and confidentiality contracts; filing and prosecuting trademarks and patents before the Trademark Office; filing copyrights before the Copyright Office; due diligence of IP matters; classifying and registering product and service trademarks belonging to Mexican and foreign companies; registration of trademarks in South and Central America, Europe, Asia and the USA, working with local counsel in each of those regions; advising Mexican and international clients on e-commerce issues related to IP; registration of domain names and cancellation of domain names. He is a member of countless professional IP-related organisations such as INTA, IFA and ASIPI, and was in charge of the PI Chapter in the negotiation of the Trans-Pacific Partnership (TPP).
Santiago Zubikarai obtained his bachelor’s degree from Universidad Anahuac, receiving the Ceneval Award for Academic Excellence EGEL and his LLM from the University of Notre Dame du Lac. He passed the Uniform Bar Exam on the first attempt in 2018. He has been working at Basham since 2009. He has experience in intellectual property matters such as trademark prosecution and litigation, domain name disputes, copyright and trademark licensing. Santiago is also a member of the Mexican Association for the Protection of Intellectual Property (AMPPI) and has obtained several diplomas from WIPO in subjects such as copyright, traditional knowledge and collective rights management.